Q3 2023 LegalZoom.com Inc Earnings Call

Yes.

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Good day, and thank you for standing by welcome to the illegal things third quarter 2023 earnings Conference call.

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Please be advised that today's conference is being recorded and I would now like to hand, the conference over to your speaker today Ms. Madeleine Crane.

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Thank you operator, Hello, and welcome to legal claims third quarter 2023 earnings Conference call. Joining me today is Dan one of the costs are chief Executive Officer and Noel.

Watson, our Chief Financial Officer.

As a reminder, we will be making forward looking statements on this call.

Forward looking statements can be identified by the use of words, such as believe expect plan anticipate will intend and similar expressions and are not and should not be relied upon as a guarantee of future performance or results.

Such forward looking statements are based on management's assumptions expectations and information available to us as of today's date.

These forward looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements.

These risks and uncertainties are or two in the press release, we issued today and in the risk factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission.

As required by law, we do not plan to publicly update or revise any forward looking statements whether as a result of any new information future events or otherwise.

In addition, we will also discuss certain non-GAAP financial measures.

These non-GAAP measures and making decisions regarding our business.

We believe these measures provide helpful information to investors.

These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Reconciliations of all non-GAAP measures. The most directly comparable GAAP measures are set forth in the Investor Relations section of our website at investors probably goes in dot com.

I will now turn the call over to Dan.

Good afternoon, everyone and thanks for joining our call I'm excited to talk about our third quarter performance not only was it strong financially, but more importantly, we continue to lay the foundation for long term growth through additional product introductions.

As we continue to grow our formations business, we're building out a unique ecosystem of compliance and financial products, while beginning to integrate higher value experts like CPA and attorneys directly into our application.

During and subsequent to the quarter, we've expanded our ecosystem with the launch of business licenses as well as the new legal forms experience, which we believe will be a gateway to attorney assistant solutions.

Let me begin with a brief summary of our financial results.

Revenue came in at $167 million up 8% year over year.

Adjusted EBITDA was $34 million for the quarter double the prior year period, and reaching a 20% margin.

In the third quarter U S census formations grew 12% year over year.

Legal zoom formations for the quarter increased 17% year over year as a result, our share for the quarter grew 5%.

As discussed on our last call we expected the sequential deceleration in market share growth this quarter as we exited legacy partnerships and began to lap the start of freemium testing.

With the transition from the partner channel I'd like to reinforce the strength of our direct channel, where we've introduced the premium lineup.

Legal zoom branded LLC formations grew over 30% year over year and as we said in prior calls the economic impact of the partnership exits was not significant which was reflected in our financial performance.

Our results for the quarter demonstrate strength in our formations business within a strong macro paired with ongoing financial discipline.

These results reflect our focus on becoming a product led growth company.

We're increasingly becoming the destination for small business starts we continue to create a unique ecosystem of financial and compliance services and we still have a big opportunity ahead of us to integrate legal and financial experts into our platform.

As it relates to our progress for the quarter I'll start with an update on our first strategic pillar scale the business.

Along with the growth in our legal to informations channel, we continue to evolve the lineup to make forming a business more affordable for small businesses by driving down cost of process and fulfill orders through automation we've.

We've made significant progress in automation and still have opportunities ahead of us.

Another key factor to enable greater scale and a better experience has been our investment in building a small business profile a capability, we believe will improve customer conversion and cross sell.

Clients products can require ICU bear vacation as well as an understanding of key attributes of the business and its ownership structure and our products are inherently capture customer behaviors through usage, our business profile and the ability to leverage it to dynamically deliver the right offerings to the right customers through the right channel at the right time Hasnt.

Been a capability up to now which means we often attempted to sell our products to business owners when it wasn't relevant or the business wasn't ready.

We are making changes to our sales and marketing strategy to better align with our evolving customer base and enhanced targeting capabilities.

Today over half of our customers choose our basic SKU with a free formation.

These customers are generally smaller and earlier in their lifecycle.

Through testing, we determined that these customers are better sold through the products and lower cost channels like E Mail oftentimes after formation.

Taxes as an example used to be sold to all customers across all channels at the time of formations. Despite many customers not requiring return in the Euro formation.

Going forward, we will more actively leverage Lz books in my LG as vehicles for Upselling from books to tax.

As a result, we made the difficult decision to reduce the size of our sales organization.

This change was executed with careful consideration to the customer experience and while we may see some short term pressure on our results during the transition our new sales strategy will have fewer outrages to a narrow group of high value customers, which we believe will benefit both NPS and revenue in the long term.

One final note as it relates to scaling our business, we're not dogmatically focus on share alone, but think of it as one of many inputs to accelerating growth no different than broadening our relationship with new customers. There will be times, when we make decisions that are counter to our share objectives, because we've identified a new opportunity to driving incremental revenue or <unk>.

<unk> per customer I.

We anticipate a few of those opportunities to present themselves in Q4, as we continue to test price optimization for the subscription portion of our existing lineup as well as introduce multiple new products in advance of our peak Q1 season.

Moving to our second strategic pillar building the ecosystem, we continue to make very strong progress.

Last quarter, we launched Lz books. This was in addition to the previous launches of LT tax virtual male in esignature.

And now this quarter, we are announcing the launch of business licenses and just over two years, we've launched five new posts formation ecosystem operators.

Business licenses are a natural extension to our compliance offerings.

The typical small business requires several licenses or permits oftentimes at the federal State County and city level in.

In industries, such as foodservice, the number of licenses and permits required can reach over 20 to.

To build this offering we've created a proprietary database of licenses across all jurisdictions triggered not only by industry and location, but also adaptable to the nuances of specific businesses and industry that may trigger additional regulations similar.

Similar to how we help customers interact with the secretary of state to keep their entity compliant. We're excited to help small businesses navigate the complex and ever changing regulatory environment with other government agencies.

This launch is another example of how we can build and leverage our unique business profile to bring value to small businesses, we believe owning and integrating this experience will afford multiple future growth opportunities.

We also continue to build out <unk>.

Since launching in August we've added mileage tracking receipt capture bulk expense classification and reporting all important features to drive trials into paid subscriptions.

We're already seeing strong engagement metrics as measured by bank connections invoices sent in paid and overall repeat usage.

As we enter tax season, you should begin to see the power of integration into our tax ecosystem and experimentation around commercialization.

While to date, we've been conservative in the rollout focusing mainly on the experience we like what we're seeing and we will begin to scale, our marketing efforts in advance of the upcoming tax season.

Our new <unk> platform, which launched last quarter Centralizes all of our offerings in one simple experience, creating a vibrant post formation ecosystem and the ability for ongoing engagement and tighter connections between our services.

We are now beginning to derive all of our activities, including compliance alerts order updates chat support and most importantly product engagement through this unified experience.

This will be a gradual process over the coming year and represents a large untapped opportunity to build ongoing engagement.

Today, an immaterial amount of revenue is derived from post formation across or upsell, but we know that many of our customers warm before beginning to operate and their needs continue to evolve with time.

Rolling with our customers is critical to our long term growth strategy. We're excited to see how active usage of <unk> books will lead to a seasonal cross sell and sell the tax or how the usage of legal forms library will drive an upsell to our E signature offering an attorney advice or how forming your entity before operating can lead to pulling licenses and <unk>.

Permits months later and just before our business opens the doors to the public.

There are abundant opportunities to expand revenue per customer post formation today, it's almost entirely unrealized.

Turning to our third strategic pillar integrate experts, we continue to adjust our go to market for LG tax now that <unk> is in market and is targeting capabilities come online.

In parallel we are investing in the filing experience as we get ready to enter the 2023 tax season in early January.

We feel good about this coming tax season, and look forward to sharing our thoughts on the newly ritual tax business on our next earnings call.

We do have a couple of updates to share today.

The first being around the beta launch of dark assist a free documents summarization product that uses generative AI and leverages our years of experience in the legal floor space.

Our belief is that the biggest opportunity in the legal space is non consumption.

85% of our customers have never spoken to an attorney despite having set up an entity to benefit from the lab building protection it affords.

We believe the overwhelming majority of small businesses simply take and live with legal risk all to avoid the cost and effort required to engage an attorney.

<unk> is designed to foster an accessible and approachable gateway to a more efficient interaction with embedded attorney.

We are in the unique position of having a strong small business brand a software capability and a scaled independent network of attorneys who have expertise in this specific matters, where our customers have concerns.

And we are now beginning to stitch them together to be clear, we're at low volume today on <unk>, but the most important important measure in our beta is whether a user that's uploaded a legal document clicks through to get legal assistance.

To date, we've been pleasantly surprised that over 40% of users that uploaded a document click through to our attorney offering that intent is the signal we've been looking for as we consider how we both integrate docker assist into our core offering and how we commercialize our attorney interaction, which is different from our existing more general legal advice.

Operator.

Jen AI as an invaluable technology unlock to demystify legal documents and a new opportunity for us to more aggressively address non consumption.

Dockets. This is now there to provide insightful to document the shared with us, but we've also been working to re imagine our legal forms offering.

Earlier this week, we launched a revamped that legal forms library, allowing users to access to over 160 attorneys certified forms completely free.

Similar to how we've been adding new posts formation software capabilities, and then bringing them together through my LG you will now begin to see us integrating DOCSIS and this new legal forms library into our products with the ultimate goal of revolutionizing how businesses collaborate with attorneys through legal documents taken.

Taking a platform approach, we believe that overtime, we can help small businesses and consumers with a wide array of legal matters through a highly efficient and cost effective interaction with attorneys.

I am excited about the progress we continue to make across each of our strategic pillars and the growth opportunities ahead of us.

Really proud of the financial discipline, we've demonstrated while investing aggressively in the product.

That said we are still early in the journey of demonstrating post formation monetization and the integration of high value experts.

All the ingredients are now coming into place to realize these opportunities and it will be a big focus as we turn our attention towards 2024.

While the progress we continue to make would not be possible without our legal zoom employees I'd like to thank them for their hard work innovation and overall dedication towards our mission to unleash entrepreneurship.

And with that I'll turn it over to Noel to discuss our third quarter results and outlook.

Thanks, Dan well good afternoon, everyone.

We had a very strong third quarter.

Our results outperformed our expectations and reflect our continued focus on driving revenue growth and profitability.

I'll now shift to provide additional details on our results for the quarter.

Please note all comparisons will be on a year over year basis, unless otherwise stated.

Total GAAP revenue in the period was $167 million up 8%.

Transaction revenue was $57 million down 2%.

We experienced 5% growth in transaction units offset by a reduction in average order value driven by the full rollout of our premium lineup in Q1 of this year.

We expect to return to year over year growth in transaction revenue in the fourth quarter as we continue to lap our premium rollout, which ramped significantly in Q4 of last year.

We recorded 237000 transaction units in the third quarter, a 5% increase was driven by higher business formation transaction, partially offset by a decline in our consumer offerings.

We completed 137000 business formations in Q3 up 17% led by growth in our LLC formation product.

Our market share business formations increased 5% year over year to 10, 2% however declined sequentially.

As signaled on prior calls the moderation of share growth in the quarter was primarily due to an intentional decision to exit certain channel partner relationships a share headwind that will persist for the next few quarters, but we strongly believe the right long term decision for our business.

As we look forward to Q4, we expect a continued deceleration in market share primarily due to the aforementioned partner exits and the lapping of an expanded premium rollout in Q4 of last year as well as a short term impact from the transition of our sales organization and certain product driven decisions that look to optimize for the best long term financial outcomes.

As Dan noted given the changes in our own product offerings. The fourth quarter presents an optimum time to test and iterate on our product lineup in advance of our peak Q1 season.

Average order value was $242 in third quarter.

Down 6% year over year, driven by our lower priced lineup.

On a sequential basis average order value increased 13% quarter over quarter due to a typical seasonal mix shift in our offerings.

We expect our <unk> to continue to improve on both a sequential and year over year basis in the fourth quarter as we lap the expanded premium rollout.

Subscription revenue was $105 million in the quarter up 14% due to an increase in the number of subscriptions due to better than expected retention in our compliance related subscriptions and growth in ARPA.

We expect subscription revenue growth to slow sequentially in Q4, as we experienced an increased impact from changes in our allergy tax commercialization strategy.

We ended the quarter with $1 $6 million subscription units.

Up 11%, primarily due to continued growth in our compliance offerings.

We expect year over year growth in our subscription units to be in the mid single digits in Q4, given the transition of lower value subscriptions related to our legacy partner exit.

We expect this transition to positively impact ARPA.

<unk> came in at $265 for the quarter up 2% year over year and up 2% sequentially from the second quarter a.

The year over year increase can primarily be attributed to a shift in the mix of our higher priced subscription offerings.

We expect year over year ARPA growth in the mid single digits in the fourth quarter.

As we launch new products, we continue to test and optimize our lineup our priority remains solving for the best overall financial outcome to drive customer lifetime value.

Partnership revenue was $6 million or flat year over year.

Following the recent launch of our own business licenses, operator with shift reporting from our partnership revenue two transaction, we will no longer breakout partnership revenue as a standalone item beginning with the fourth quarter.

It's important to note that we maintain strong symbiotic relationships with our banking website insurance and other partners, where we often benefit from bilateral business promotion.

The corresponding revenue from these remaining partners will be incorporated into the transaction and subscription revenue line items of our recorded in going forward with the majority of the contribution falling into transaction.

Turning to expenses and margins, where all of the following metrics are on a non-GAAP basis.

Third quarter gross profit margin was 67% compared to 69% in Q3 of last year, driven by higher filing fees as a percentage of revenue.

We experienced a higher level of business formation volumes as well as the reinstatement of filing piece in California, which were paused for 12 months beginning in the third quarter of 2022.

Sales and marketing costs were $48 million in the third quarter or 29% of revenue an 11 point improvement from Q3 of last year.

This includes a 21% reduction in customer acquisition marketing costs, which were $35 million per quarter.

We expect a sequential decline in cash spend in Q4 in line with our regular seasonal slowdown, which battery are relatively flat on a year over year basis.

Technology and development expenses were $16 million in Q3 up $3 million or 21% year over year.

We expect similar year over year growth in this line in Q4, as we continue to invest in product and engineering talent.

General and administrative expenses were $59 in Q3 or near flat year over year.

Our solid revenue results and continued focus on profitability drove stronger than expected adjusted EBITDA of $34 million for the quarter, reflecting a 20% margin.

This compares to adjusted EBITDA of $17 million or an 11% margin in the third quarter of 2022.

Our deferred revenue decreased $3 million from the prior quarter.

During the third quarter, we repurchased four 7 million shares of our common stock concurrent with a secondary equity operated for $9 55 per share for a total of $45 million.

Exhausted, our existing $150 million stock repurchase program that was authorized in March of 2022.

In total we repurchased $15 1 million shares of our common stock at an average cost of $9 92 per share under the program.

To underscore our continued confidence in the business today, we are announcing that our board of directors has approved a new share repurchase program of up to $100 million of our common stock with no fixed exploration.

We plan to continue to Opportunistically repurchase shares of our common stock as part of our balanced approach to capital allocation.

As of September 32023, we had cash and cash equivalents of $212 million and no debt outstanding.

We will continue to leverage our strong balance sheet and liquidity to fund profitable growth and return value to our stockholders and.

In regards to capital allocation, our priorities remain unchanged we.

We are first focused on organic investments in the business followed by strategic plug in acquisitions, and lastly shareholder returns via repurchases of our common stock.

We expect to exit 2023, and a strong cash position, which enables us the flexibility to execute against all three priorities simultaneously.

I will now provide guidance for the fourth quarter and full year 2023.

As always macro conditions remain a key factor in our performance and outlook.

<unk> business formation growth accelerated in the third quarter and has been healthy year to date.

Our guidance includes an expectation that current macro trends continue.

Based on these factors, we expect fourth quarter total revenue of $155 million to $157 million or 6% year over year growth at the midpoint.

And fourth quarter, adjusted EBITDA of $28 million to $30 million or 19% of revenue at the midpoint.

For the full year of 2023, we are raising and narrowing our guidance for total revenue to $657 million to $659 million or 6% year over year growth at the midpoint.

As a result, we are also raising our full year adjusted EBITDA to a range of $114 million to $116 million.

Were 17% of revenue at the midpoint.

And with that let's please open up the call for questions.

Thank you.

As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one one again standby as we compile the Q&A roster.

Okay.

Okay.

One moment please for our first question.

Our first question will come from Matthew Pfau of William Blair.

Your line is open.

Hey, great. Thanks for taking my questions and nice quarter guys. Just wanted to first ask from a macro perspective, maybe some more detail on what youre seeing there and versus last quarter and how any key metrics such as retention top of funnel activity conversion, how those have trended in the third.

Versus last quarter. Thanks.

Yes, thanks for the question Matt.

Yes, it remains healthy I mean, if you look at.

And data it has sequentially improved each quarter. So it's been up 4% in the first quarter seven in the second and 12 in the third.

We do have some questions about the extent of the strength in Q2 and Q3.

We are.

Anticipating that some of the issues with the.

The employee retention credit may be inflating EIA data a bit and thats.

Something we saw actually.

Back in the.

Covid days with the PPP loan program, we saw a slight dislocation to our own internal data and I think that probably is occurring to some extent this year.

But that said that's around the edges and it still remains quite strong.

And what I would also say is that the long term.

Macro bands very very favorably.

We continue to see large platforms increase in prominence.

In general they are actually providing.

Strong enterprise capabilities.

For very small businesses and consumers.

Those are good platforms that allow a consultant to go out there.

The business relatively quickly.

E Commerce, which allow us to create a retail presence.

Phil minutes operations Theres, just so many ways now to play.

And that's on top of other important shifts like work from home we know more.

Most small businesses warm their business, while they're working for someone else and now they're working from home.

There is a strong demographic shift shift with Gen Z.

Even things like onshoring, so it's very difficult to bet against this macro there might be times, where we see micro shifts that go negative but that doesn't concern us that much in fact, we're in a really strong position if that happens.

In the very long term, we expect this trend to continue and I'd also say that we're seeing things like retention.

Remain pretty strong in fact, we had a little bit of.

A surprise in the quarter in terms of the strength of some of our retention.

Data and we're still seeing attach rates that are holding up so all of the things that we've talked about in premium.

Played out still so the macro and the combination of our premium lineup seem to be working.

Great just a quick follow up at 30% growth in LTE branded business formation, how does that compare to perhaps the prior quarter, just sort of trying to parse out the different components between that and the <unk>.

Channel partnerships as well as just lapping the introduction of the free LLC product.

Yes, we definitely wanted to share that one time, just so people could get a sense because obviously the partner channel changed.

It happened and so it kind of made the share gains look a little bit different.

It slightly declined in Q3, but thats, what we would have expected because we're also beginning to lap some of our freemium testing and also we've talked about this before Q2 of the prior year latest when we made a marketing shift from some of our brand spend into performance spend and so that was a weaker quarter in 'twenty.

So it was a little bit more of a favorable compare.

But yes that if anything should show that theres still a lot of strength.

As we talk about our legal channel.

And again, the partner channel as sort of a deliberate choice that we're making.

<unk> impacts us negatively on the share side.

Great. Thank you I appreciate it.

Yes, Thanks, Matt.

Thank you.

One moment please for our next question.

Our next question will come from Andrew Boone of JMP Securities. Your line is open.

Thanks, So much for taking my questions I wanted to go to attach rates.

1% sequential growth for attach rates with a low end and the total number of nominal units as we think about the <unk> number of 15000 was also a low recently can you guys. Just touch on any additional details you may have in terms of subscription attach rate as we think about premium rolling through the model or maybe.

Just anything else on retention to unpack that thanks, so much.

Alright, Thanks for the question, Andrew Im assuming youre talking about the net.

Subscription adds relative to formation.

Growth.

Correct.

Yeah, So there's a.

A couple of moving parts when we start to look at those numbers right now.

Part of that has to do with starting to exit the partner channels as well.

Yes.

It has a negative short term impact on subscription units.

With a constant on the formation side thats sort of doesn't overcome.

So that's really more anomalous.

And frankly, youll, probably see that continue for a little bit because we will start to accelerate on some of the reduction in subscription units, what youll see offset that is stronger <unk>.

Which kind of reflects the fact that they were wholesale units and they werent all that valuable on a revenue basis. So so again, that's part of that deliberate choices that we're making to get out of the partner channel, Yes, and just to add.

Additionally, specific to that Andrew as we get into Q4, and we see that the transition on the subscription unit side kind of.

The larger effect related to the partner transitions, we actually expect subscription units to be down sequentially, but to Dan's point.

We see that as a it will positively impact <unk>, given the lower value economics of those units.

Okay.

And then Dan in your prepared remarks, you talked about tests for pricing can you just let us know any details you may have today on how youre thinking about that.

Yes.

<unk> talked a lot about the premium lineup.

For the bulk of this year and one of the things that.

The initial lineup does is it creates a lower cost transaction.

Associated with the initial purchase the part that we're now circling back on US now that we have the bulk of our customers and coming through through free SKU and do we have the right pricing on all of our subscriptions that we add on top of that initial purchase.

So there's a lot of testing going on I mean parts of it are on our core compliance subscriptions parts are still on some of those additional services that drive higher engagement post <unk>.

Purchase as well I'd say that we're still not in a heavily optimized lineup.

If you think about launching five products over the last couple of years and then changing the core lineup.

It requires a lot of testing to get to the optimal pricing across the whole purchase of the customer and then on top of that.

We also now do have this post formation opportunity that's starting to emerge which also helps us think through what should we include in the formation final itself and so think about all of those variables.

About the level of volume that we have of formations that come through and thats going to be a continual journey over the next couple of quarters to make sure that we have the right lineup for all of our customers.

Thank you.

Yes, Thanks, Andrew.

Thank you.

And one moment please for our next question.

Okay.

Our next question will come from the line of Brent Thill of Jefferies. Your line is open.

Hi, This is John <unk> on for Brent Thill two questions on the LSA books, you've talked a little bit about that but I'm wondering.

That launch is going to get traction on what kind of.

Customers and at what stage might be.

Matching that and then second on this.

Org adjustment of transactions in any way to kind of quantify on size of kind of the <unk>.

<unk> the changes Youre, making there thank you.

Sure I'll take the first one and then maybe grab the second one so super excited so we've only been in the market.

We're a couple months here and we went into market with with a great product, but also knowing that we were missing some key features.

And you can get a sense of the philosophy that we've almost closed the gap on all of those features within those couple of months.

Just to remind everybody.

Over 90% of the small businesses that form to us have no accounting solution.

Interestingly they don't have the highest brand awareness of the category either I mean, they're really looking for a solution that is custom built for them and they are truly micro businesses.

The other thing that's interesting is we've talked about this books for many people precedes the need for tax.

In some cases, our customers come in and they're not really going to be filing a return for the year that they form but at the same time, they want to get established properly on the right financial management solution.

And so that's the point of launching this we are seeing really strong engagement.

On things like bank connections and invoices sent and paid.

We like the trial to paid conversion and I'd say that we've been doing this at a smaller scale. So a lot of our focus when we launch a product is to make sure that the customer metrics are great and experienced metrics are great before we start to scale youre now going to see us.

Probably more actively marketing it to our base going forward, because we're seeing that we're getting the right signals from it.

Yes, and on the sales cost question.

The impact on Q4, because the transition is happening during the quarter is not that significant.

And just the way we're viewing our sales channel in general is along the same lines as we think about kind of our overall performance marketing spend.

So really as we calibrate on bringing costs back into the organization it'll be on a performance basis and so we will provide more detail around our thoughts for 2020 for impact on our next call, but the lens that we're taking and the approach that we're taking and looking at it from a performance lens.

And we will scale up as long as we're seeing the right ROI on the spend.

And that'll be determined kind of as we grow into it.

Just adding to that I think sales for us we touched all of our customers. So that was that that wasn't the right approach as we went to free.

And as you think about our sales team a lot of what you want them to be doing is really focusing on the highest value stock post formation.

So this is a big change to the sales organization strategy and I do believe that we'll build it up over time as we continue to prove that we can do a better job of monetizing post formation.

Okay.

Thank you.

Yes. Thank you.

Thank you.

One moment please for our next question.

Our next question will come from the line of Ron Josey of Citi. Your line is open.

Okay.

Hey, guys. This is Jake on for Rob. Thanks, Thanks for question.

Dan I just wanted to see if you could elaborate on the flight.

License product.

Could you maybe touch on just the key problem that we're solving the product and then thinking about what the opportunity could be going forward.

And then just quickly you might've touched on it but any early indications on what the early retention rates look like for that.

Uh huh.

Going back to like the early cohorts of the freemium.

Formation customers. Thanks.

Yes, thanks for the questions Jake.

Maybe I'll hit the second one first because it's kind of a quick one.

They look pretty similar to our prior customers. So we haven't really seen any retention dynamic that's different.

Those customers and I'd say that the goal would be that over time.

Become a customer base that is maybe more easily monetize able post formation because they go into operation so that that would be our hypothesis and.

And Thats actually.

Currently looking relatively good.

Business licenses I am extremely excited about so one of the biggest problems that small businesses have today.

When they go into operations they start to bump up against a lot of regulations and permitting requirements in the upfront comments I talked about an example of a.

Foodservice company, if you think about.

Complex business like restaurants, or catering that also has a food truck or maybe they also serve liquor.

If you're doing that in a city.

Could have up to 25 licenses required and it's a very dynamic environment.

Meaning that the regulations can be changing on a monthly or quarterly basis and new requirements can be added.

And not only that all of those licenses.

Can have an exploration.

And there is oftentimes the chain to share those licenses with another party or your inspected I mean, a great example is if you ever visit someone who's in a truck driver moving materials Cross state lines. They carry a big folder haul their licenses in case they get inspected.

So it's an evergreen problem, it's complex and it hits all different types of agencies that are small business doesn't want to have to communicate with so our goal is to make that seamless make it simple and at the same time. It allows us to also understand more about the business and how they operate and that data.

<unk> is incredibly important.

Think about some of the questions we need to ask to understand the licenses that are required. They are almost identical questions to everything you need to understand to make a recommendation about business insurance. So as an example, and so we continue to build out. This is this unique profile of all the data of a small business, which makes the next service they need that much.

It's easier for us to anticipate and also that much easier for them to fill in the application. So it's a big opportunity. We know it's important to our customers we've been in that business through a partnership before.

And so it's a bit of a known quantity and I'm really really excited to integrated into our experience.

Thanks, a lot.

Yes, Thanks Jake.

Thank you.

To ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.

One moment as we compile the Q&A roster.

Okay.

Okay.

And one moment please for our next question.

The next question will come from Fiona Hynes of Morgan Stanley. Your line is open.

Hi, Good afternoon. This is fiona on for a little bit quarter. Thank you for taking the question I wanted to ask on ILD.

Big focal point of this call has been progress on the entire subscription ecosystem with miles.

So curious do you see an opportunity to improve conversion rates and cross sell through this offering over time, and where should we expect to see that layer in some model.

And any thoughts on the timing for that as well. Thank you.

Yes so.

So the question Fiona.

<unk> is highly strategic for us.

And again just to go back when I joined legal zoom, there really wasn't an experienced after you formed your business.

Since then we've launched all these new subscriptions that drive more engagement, we brought them into.

A single unified experience over the last quarter, and we are seeing leading indicators like <unk>.

Session time go up and we're starting to see some of the post formation monetization.

Begin and some of the newer subscriptions that were offering. So so all of that is leading to a good signal, but also very early like this is.

Immaterial amount today of revenue that exist and happens post the formation events.

I think as you as you look forward you should start to see this in <unk>.

And you should start to see this as sort of incremental to what we see in the formations flow itself.

And again it's.

It's a big opportunity I don't want to I don't want to get share any metrics because it is early.

But it's a heavy focus area for us and really we're rebuilding our whole marketing motion against it.

Great. Thank you.

Thank you.

Thank you.

And I'm seeing no further questions in the queue.

This will conclude the Q&A session and we will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

Okay.

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Okay.

Okay.

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Thanks.

Okay.

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Dan.

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Yes.

Okay.

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Okay.

Good.

Yes.

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Okay.